Adding the outside-in perspective to Enterprise Risk Management
Source: Principal RiiR
Author: Koenraad van Hasselt
Could Toyota, BP, SHELL, ENRON and WorldCom have avoided the damage to their reputations ? Probably not, but if only their Executive Boards would have been informed about early signals of negative stakeholder opinion, they might have gained valuable time to prepare for the impending crises, prevent escalation of decreasing stakeholder support and limit reputational damage. In order to do this, companies need to put the right listening posts, pick up signals, recognize the patterns and monitor these over a period of time.
No one will disagree that a good corporate reputation is of tremendous value to a company. Risk to reputation, or reputational risk, has been on the radar screen of risk managers for quite some time, but there are only few companies that measure, analyze and monitor reputational risk in a structured, timely and accurate manner. All too often, reputation is left to the Corporate Communication Department, while existing risk management practice has failed to incorporate reputational risk – the risk of all risks or ‘meta risk’ – in their systems.
In the aftermath of serious corporate governance failures and other major catastrophes, managing reputational risk has become all the more important due to regulatory compliance requirements, strengthened regulatory powers, the growing influence of pressure groups, rising stakeholder expectations and – last but not least – communications technology. In this day and age, every individual has a mass medium at his hands.
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